India: Iron ore fines export index drops to three-month low on weak Chinese demand

Chinese interest in low-grade iron ore fines continues to slide amid steeper steel production cuts. SteelMint's weekly export index for low-grade Indian iron ore fines (Fe 57%) decreased by $4/t w-o-w to $80/t FoB east coast India. The index has fallen to a three-month low, as per data maintained with SteelMint.

"The market is extremely silent and the bids are not viable. Prices have crashed after significant fall in China's iron ore futures seen over the last two days," informed a trader.

"We haven't heard any deal this week. Lack of liquidity and decline in bids have kept the market silent. Bids may even fall below $80/t FoB for Fe 57% fines in the short-term," an Odisha-based mining company executive said.

China's Shandong Province has issued a notice clearly requiring that this year's crude steel output should not exceed 76.5 million tons (mn t), which is based on the output of iron and steel enterprises in 2020, as per media reports.

Rationale:

• Price indicators- No confirmed deal was reported in the publishing window and hence given 0% weightage under T1 trade.
  
  
• SteelMint has received seven (7) indicative prices and offers during the current publishing window, and two (02) were considered for price calculation as T2 inputs, being given a weightage of 100%.
  
  

Market highlights:

• Spot iron ore prices fall by over $20 w-o-w: Spot iron ore fines Fe 62% prices fell sharply today at $201.50/t, CFR China as against $213.6/t assessed yesterday. Prices have dropped by $20.8/t w-o-w as against $222.3/t CFR China a week ago.
  
  
• Rising iron ore stocks at Chinese ports - Iron ore inventory at major Chinese ports increased by around 0.5 mn t to 129.5 mn t last week compared with 129 mn t in the previous week, as per data maintained by SteelHome.
  
  

• DCE iron ore futures continue downtrend: Dalian iron ore futures fell by 3.1% on 22 Jul'21 and were on course to hit a three week-low on persistent dull demand due to production cuts in China. DCE iron ore futures Sept contract closed at RMB 1,138/t today, lower by RMB 36/t d-o-d
  
  
• Freight rates stable w-o-w- Freight rates for 50,000-55,000 t export vessels from east coast India (Paradip) to China remained stable at $27/t w-o-w. However, 21-28 days' quarantine and demurrage charges remain matters of pressing concern adding to the costs.
  
  
• OMC low-grade iron ore fines auction receives no bids: OMC conducted an iron ore fines e-auction today where 66,000 t of low-grade fines (Fe 56% basis) failed to fetch bids amid subdued demand. The base price was INR 7,154/t (inclusive of taxes).